With permission, Mr Speaker, I shall make a statement to the House about the further devolution process in Scotland and the publication of the heads of agreement resulting from Lord Smith’s five-party talks. As the Prime Minister has already said this morning, we back the agreement and its recommendations, and will produce draft legislation in January.

The referendum on independence that was held on 18 September 2014 saw Scotland vote decisively to remain within our UK family of nations of England, Wales, Scotland and Northern Ireland, backed by the strength, security and stability of the United Kingdom. The turnout across Scotland was nearly 85%, and more than 2 million people made a positive choice for Scotland to remain part of the UK.

During the referendum campaign, the Prime Minister, the Deputy Prime Minister and the Leader of the Opposition made a joint commitment to deliver more powers to the Scottish Parliament. The Smith commission, chaired by Lord Smith of Kelvin, was up and running on 19 September, and Lord Smith convened cross-party talks to reach agreement on the proposals for further devolution to Scotland. The process has been thorough and extensive. The party representatives were drawn from the five main political parties in Scotland; this was the first time ever that all five had participated in a devolution process.

I would echo the comments of Lord Smith in the foreword to his report:

“This agreement is, in itself, an unprecedented achievement. It demanded compromise from all of the parties. In some cases that meant moving to devolve greater powers than they had previously committed to, while for other parties it meant accepting the outcome would fall short of their ultimate ambitions. It shows that, however difficult, our political leaders can come together, work together, and reach agreement with one another.”

In preparing the report, Lord Smith heard from a wide range of Scottish civic institutions and members of the public. Over 400 submissions were received from organisations and groups, and over 18,000 submissions, including e-mails, letters and signatures to petitions, from people across Scotland.

The Smith commission has today produced comprehensive heads of agreement ahead of the St Andrew’s day deadline contained in the timetable. This is a significant achievement and historic moment for Scotland. I thank Lord Smith and the party representatives for their work. They have worked hard against a challenging timetable, covering an enormous area of ground. This work will deliver a substantial package of new powers to the Scottish Parliament.

The heads of agreement provide for a durable but responsive constitutional settlement for Scotland within the United Kingdom. They give greater financial responsibility to the Scottish Parliament, with an updated fiscal framework for Scotland, consistent with the UK fiscal framework. For the first time, over 50% of the money spent by the Scottish Government will be raised by the Scottish Government. That is an important step which builds on the measures brought forward by this Government in the Scotland Act 2012, and further increases the financial accountability of the Scottish Parliament to the Scottish people.

The recommendations provide for key welfare measures to be designed by and delivered in Scotland. That will give the Scottish Parliament the tools—and the responsibility—to tackle a range of issues with specific consideration of local circumstances, including those related to social care, long-term unemployment and housing, while continuing to benefit from the strength and stability of the UK-wide system.

The recommendations build on the already significant powers of the Scottish Parliament in social justice and a range of other policy areas. Together, those recommendations give greater responsibility for more decisions affecting Scotland to be made in the Scottish Parliament and paid for by revenue raised by the Scottish Parliament. However, further devolution is just one part of this story. People in Scotland were unequivocally clear on 18 September that Scotland should retain the security of being part of our United Kingdom. The Smith commission’s remit was clear—to set out proposals for further devolution within the United Kingdom—and that remit was signed up to by all parties participating in the process, including the Scottish Government. The conclusions reached by the parties ensure a set of proposals that do not cause detriment to the UK as a whole or any of its constituent parts. The Government are committed to ensuring that Scotland and the whole of the United Kingdom continue to prosper from our single domestic market, our social union and the strength that comes from the pooling and sharing of risks.

People in Scotland voted on 18 September for the jobs and opportunities that are created by being part of a larger United Kingdom with one currency, no borders and more money to spend on public services. People in Scotland want to keep the advantages of the UK pound, UK pensions, UK armed forces and a strong UK voice in the world. The package that has been announced today allows that to happen.

As the Prime Minister has already made clear, the Government back the heads of agreement and their recommendations and we shall get on with producing draft legislation. The draft clauses will be produced by Burns night, 25 January, meeting the next phase in our commitment to the people in Scotland. That work begins today. A team has been brought together with leading officials in the Scotland Office, HM Treasury, the Department for Work and Pensions and the Cabinet Office. That team will work closely with all lead policy Departments within the UK Government. The team will remain in place to deliver a Bill in the UK Parliament following the next general election.

To support the preparation of the draft legislation, I have invited key Scottish stakeholders representing a wide range of sectors to form a stakeholder group. I shall provide further details of the membership and terms of reference of the group in due course, but it is my intention that it will support the Government’s work translating the heads of agreement into the draft legislation that we shall publish by 25 January. As Lord Smith said in his foreword:

“Through this process I have worked closely with people who can argue passionately with one another while sharing an equal concern and love for their country. I would like to thank them all for their input, challenge and support. I hope that, in the end, they can work together, maintain their energy and use it to create a Scotland which is even stronger and even better.”

Having a more powerful Scottish Parliament inside a strong United Kingdom is the best outcome for the people of Scotland and the people of the United Kingdom. This is what we voted for on 18 September. Today’s report is an affirmation of the vow that was made in September. It is a historic moment for Scotland.

The cause of home rule has been at the heart of Scottish politics since the days of Gladstone. This agreement provides a modern blueprint: Scottish home rule within our strong United Kingdom—home rule for Scotland that can open the door to constitutional reform for the rest of the United Kingdom. We can achieve home rule all round.

I thank the Secretary of State for advance sight of his statement, and join him in thanking Lord Smith of Kelvin for his work and his report, and indeed all the commissioners. I want to pay particular tribute to my right hon. Friend Mr Brown, whose proposals during the referendum set us on the way to delivering this momentous agreement to deliver a powerhouse Parliament.

As the Secretary of State has said, this is a historic day for Scotland. Ten weeks ago the people of Scotland—in overwhelming numbers—confirmed Scotland’s place in the United Kingdom. It was a decision made on the highest turnout ever seen in these isles, and it was a vote for change: change in the way Scotland is governed, change that will see more decisions taken closer to people, but safer, faster, better change as part of the United Kingdom. This is a promise kept and an agreement delivered.

The Labour party was very clear that we would honour the promises made during the referendum, and we have delivered. As the Secretary of State has said, this has been achieved in a co-operative and constructive process, working in the spirit of consensus that people across Scotland expect. That is why we wholly endorse the recommendations of the Smith commission and we give our guarantee to the people of Scotland that if—or, rather, when—we are in government after May, we will legislate for these powers in our first Queen’s Speech.

This agreement will see more powers over tax, welfare and jobs transferred to the Scottish Parliament. We have secured guarantees over the voting rights of Scottish MPs on the Budget and on the continuation of the Barnett formula. We believe this provides the best deal for the people of Scotland. In fact, today’s deal is more radical and goes further than many had anticipated. We on this side of the House believe that the principle we have worked for today—pushing power closer to people—is one that should be followed across Britain. That is why we will continue to call for a constitutional convention to be established to consider how this can be achieved, working with all the nations and regions of the United Kingdom.

Now that agreement has been reached, will the Secretary of State tell the House how the recommendations of the Smith commission will be implemented and what the timetable will be, and will he specifically and in detail outline how hon. Members will be involved in this next stage of the process, as the draft clauses are produced?

Given the success of cross-party working that is inherent in the work of the Smith commission, will the Secretary of State outline how the parties will be involved in this stage, and how the Opposition will be consulted on the details he announced in his statement?

As Lord Smith pointed out in his statement this morning, these additional powers will also mean that the Scottish Parliament’s own processes will need to be strengthened to enable it to hold the Government to account. Will the Secretary of State tell the House what consultation there will now be with the Scottish Parliament to ensure that it is well-prepared for this transfer of powers?

Lord Smith also recommended closer working between the Scottish Parliament and Government and the UK Parliament and Government. How does the Secretary of State intend to take forward that recommendation and ensure that Members of this House become involved?

For the past two years, our country has been divided along yes and no lines. Today marks an important moment. There are no longer yeses and noes, just Scots with new powers, and we look forward to working across Scotland to deliver them. Labour will deliver those new powers in our first Queen’s Speech in May. More power is now in Scotland’s hands, and it is for all of us to work together to create that better Scotland.

I acknowledge that this process has not been easy for any of the parties; it has involved compromise on all sides. I pay tribute to the hon. Lady and her colleagues in the Scottish Labour party for the compromises and progress that they have made. They have acted in accordance with the spirit that was expected by the people of Scotland following the referendum vote.

The hon. Lady mentioned the proposals for the rest of the United Kingdom. As I have said at the Dispatch Box on a number of occasions in recent weeks, that debate is now happening and I welcome it. I share her enthusiasm for a constitutional convention. She will be aware that the Government have set up a Cabinet Committee to look into the wider issues of devolution in other parts of the United Kingdom, and I deeply regret that her party has chosen not to take part in that. I hope that, even at this late stage, Labour Members will change their minds. She and her right hon. and hon. Friends can anticipate receiving an invitation soon to contribute to the Command Paper that the Government will be bringing forward, so if they have proposals, we will be interested to hear them.

The hon. Lady asked about the implementation of the heads of agreement. As I explained in my statement, a stakeholder group will be set up, and I anticipate there being opportunities for all parties—and, indeed, for groups beyond the political parties—to have a role in that. I will update the House on that as soon as possible.

One of the most important and prescient observations that Lord Smith made in his personal recommendations was that there should be closer working not only between the two Governments—which has long been accepted to be the case—but between the two Parliaments. Indeed, it was suggested that you, Mr Speaker, might soon consider meeting the Presiding Officer of the Scottish Parliament to build that co-operation between the two Parliaments and the two Governments. Those recommendations have a great deal to recommend them. The hon. Lady asked how the recommendations in the report would be implemented, and I can tell her that they will be implemented without hesitation, reservation or equivocation.

May I say to the Secretary of State that this is no way to introduce massive constitutional change to our country, given the major implications for the rest of the United Kingdom, which has not been consulted at all, not least on the question of how English votes are to be applied to English laws? Does he believe that these proposals will contain or further inflame separatist sentiment in Scotland?

In Scotland, on 18 September, we decided that we wanted to remain part of the United Kingdom. That was clear and unequivocal, and it is that position that we are now entrenching. To answer the hon. Gentleman’s last question, I believe that these proposals will strengthen the position of Scotland and the United Kingdom for the future. I am sensitive to his concerns about the need for constitutional change in other parts of the United Kingdom and I understand that there is an imbalance within our current constitutional framework. Let me tell him that that was the case before we set up the Scottish Parliament in the first place—it was one of the reasons we set up a Scottish Parliament. The process has been an evolutionary one across the UK and that evolutionary process must now continue. I hope that he and his colleagues, in England in particular, will now take to that debate with enthusiasm and build a consensus that can bring forward the change that is necessary.

I, too, welcome the proposals being made by the Smith commission today, transferring, as they do, not just more powers but significant new responsibilities that will be taken on by the Scottish Parliament. As we implement those and discuss, as we must, further devolution to other parts of the United Kingdom, will the Secretary of State ensure that we do nothing that undermines the integrity and the strength of the United Kingdom? In particular, will he ensure that we do not undermine the fiscal union, which is one of the central pillars of that United Kingdom? The majority of people in Scotland voted clearly to stay within the United Kingdom, and I believe the majority of people in the entire United Kingdom want to see it continue. We must be very careful to manage this carefully—other big countries have done it and we can do it, too.

I do not disagree in any way, shape or form with what the right hon. Gentleman says. Indeed, the sentiment he refers to was reflected in the remit we gave Lord Smith and then in the principles that underpinned his work—the principles agreed by all five parties to the discussion. I believe that what they have brought forward today is entirely consistent with those principles.

Does my right hon. Friend agree that it is important for the integrity and credibility of the political process in this country that commitments given by political leaders during the referendum campaign are honoured? Does he further agree that the proposals he has just announced further accentuate the imbalance in the British constitution between England and the rest of the United Kingdom? Does he therefore agree that it would be wrong, as some have proposed, to kick the McKay proposals into the long grass? They now need to be addressed with some urgency.

D

Good point Sir George, let us at last grasp the West Lothian question.

I could not agree more with the right hon. Gentleman on the importance of honouring the vow that was made, and that is what we are about today. As I have acknowledged, there is currently an imbalance within the UK constitutional framework. As a federalist, I have long believed that that needs addressing. I do not think anything should be kicked into the long grass. He has been involved in the management of this House in various capacities for many years now, so he will be as aware as I am that once these things are changed it is difficult to change them back if we get them wrong. There is a need for constitutional reform and it goes far beyond the Standing Orders of this House.

I thank the Scottish Secretary for his statement, and Lord Smith and the commissioners for their work. The substantive parts of this are the devolution of less than 30% of Scotland’s tax base and of less than 20% of welfare, and the assignation of a share of VAT. Although that is interesting as far as it goes, I note the absence of other substantive job-creating powers. The Scottish National party will not stand in the way of these powers; it is important to put that on the record, and I do welcome the report as modest progress. However, will the Scottish Secretary confirm that however they are dressed up, these proposals do not reflect the powerhouse Parliament that many in Scotland believed they had been promised before the referendum?

First, let me try to adopt a more appropriate tone than the hon. Gentleman has perhaps just done and congratulate him on his recent election to the position of deputy leader of his party. It is unfortunate that he did not use the word “welcome”; there are significant job-creating powers in this package and the Scottish Parliament already holds significant job-creating powers. If Nicola Sturgeon is sincere when she says that she wants to govern for the whole of Scotland, she should get on and use the powers that she has, welcome the ones that she is getting and use them for the benefit of the people of Scotland.

The hon. Gentleman predictably and depressingly seeks to suggest that this is not a fulfilment of the vow. Well, the vow is on the front page of the Daily Record. For the benefit of the House, I have brought that paper with me today. The front page says, “The vow delivers.”Let me draw the House’s attention to the article itself. On page 3, it says that

My right hon. Friend can now be assured of some favourable remarks in relation to what he has just said about the Daily Record. He will not be surprised that I, rather less grudgingly, welcome both the process behind the proposals and the proposals themselves. Does he understand that I welcome the accusation that these proposals are federal in nature, because it is in federalism that we will find the best constitutional solution to meet the aspirations of all four of our nations and, at the same time, secure the advantages of a secure United Kingdom? Is not the truth now that we should all be federalists?

Speaking for myself, I always have been a federalist. Indeed, I understand that I can now count on the support of Mr Brown in that aspiration. May I also recognise the pivotal role that my right hon. and learned Friend took in the formulation of my own party’s proposals? His commission was the first intervention in this debate, and it very much established the tone and set the bar at a level that others felt it necessary to clear. Ultimately, a federal structure is what this country needs. It works perfectly well—in fact it works much better—in countries around the world. Clearly, it will take time. What we are about here today is delivering in the here and now on the pledge that we made in the referendum.

I seek clarification from the Secretary of State as to whether the support of the Smith commission was unanimous. If that is the case, great credit is due to the Greens and to the SNP in particular for being willing to sit down and collaborate with the Liberals, the Conservatives and Labour to find something around which we can all agree. I hope the right hon. Gentleman agrees that if we have had unanimity in producing the report of Smith, we now must have unanimity in implementing it.

That unanimity is important. I understand that that was the basis on which the agreement was made. Unfortunately, given the tone of some of what we have heard today, John Swinney, who by all accounts performed a significant role in the commission, has not been able to bring everyone in his party with him. That is to be regretted.

Does the Secretary of State agree that once Scotland is determining her own income tax rates and bands in the Scottish Parliament, it would be quite wrong for Scottish Members of this Parliament to be trying to fix those bands and rates for the English?

I welcome the report. This is a great day for democracy and what is good enough for Scotland is now good enough for England. The Secretary of State will have seen in The Times today a letter from local government leaders from the greatest to the smallest asking for devolution in England. Rather than having to drag it out of Whitehall over 20 years, as Scotland did, through lobbying and referenda-ising, we should get to this quickly. If we do not, through our sloth the Secretary of State might create in England the same nationalism as was evident in Scotland, which I think he would regret. Will he not keep putting this off and talking about constitutional conventions that might never report? We know what we need to do: put it in the manifestos, unite the House and give England local devolution, as Scotland is now getting.

I congratulate the hon. Gentleman, as I suspect that that is the first time that Hansard will have been required to record the word referenda-ising. It is novel and creative. I am not entirely sure whether the growth of nationalism in the different parts of England will be a consequence, but having sat through a six-hour debate just a few weeks ago in this House on the subject of devolution across the whole United Kingdom, I would say the one thing that was clear at the end of the debate was that there is not yet consensus—[Interruption.] It might well need leadership, but leadership alone will not be enough to build consensus. The hon. Gentleman would do well to listen to the words of his own Front Benchers on the question of a constitutional convention. That is not a delaying tactic, as he seems to think. In my view, it is the only feasible way of building consensus to get the change that is wanted.

The report is a welcome first step towards stabilising the Union, redressing a Scottish grievance, and the Treasury Committee will consider it as part of its inquiry into fiscal devolution. Does the Secretary of State agree that another crucial step must be to redress an English grievance: that Scottish MPs vote on English laws? That must end, notwithstanding the curious wording of paragraph 75 of the agreement. Does he further agree that the English must have a veto on all laws that largely or exclusively affect them, and that the case for that is all the stronger with full devolution of income tax? Nothing less will do.

It is because we understand the need for change—as I have said already, I and the whole Government are sensitive to that wish for change—that we have set up the process that is being led by my right hon. Friend the Leader of the House, which is aimed at building consensus to bring about that change.

I welcome the comprehensive cross-party consensus to work together for the benefit of the whole of Scotland that the Smith commission has achieved. The Secretary of State will be aware, as I mentioned this to him in Scottish questions yesterday, that there is a growing tax gap, given that there is a higher proportion of basic rate taxpayers and we still do not know how those on the highest incomes, such as Brian Souter, might divert their tax bases so that they do not become liable for Scottish tax rates. Before we produce a White Paper next year, may we have a full analysis from the Treasury of the tax base, so we can make sure that any final block settlement accurately reflects the tax raised in Scotland and ensures that we do not end up with Scotland having a worse deal?

Today’s publication and the agreement we have offer us a range of opportunities in Scotland. In particular, we can do the things for the Scottish economy that will produce the growth that will expand that tax base. The important point is that, having made this decision, we should get on and implement it and then start using the powers, rather than constantly talking about our constitutional position.

How does today’s report fit in with the promise made by the Prime Minister on 19 September that any change giving more devolution in Scotland would go in tandem with, and at the same pace as, changes in the rest of the United Kingdom?

No. I have to contradict my hon. Friend. It has been made perfectly clear all along, and the Prime Minister himself has said, that the change that was promised to Scotland will go ahead according to the timetable that was given to the people of Scotland. It is not contingent on other changes.

I welcome today’s statement and I think people across Scotland will welcome it. The referendum changed Scotland, and today’s statement is confirmation that we need to respect the wishes for change of the no voters and reach out to many of those who voted yes as well. In welcoming the tax powers, may I point out that the new welfare powers are just as crucial? Will the Secretary of State confirm that the new welfare powers total perhaps as much as £3 billion of new responsibility for the Scottish Parliament and the Scottish Government, and that he is minded to enable the devolution of those powers at a pace and in a manner that will enable Scotland to challenge poverty and the generational disadvantage that blights far too many families?

I can confirm the figure that the right hon. Gentleman has put to the House. What is being offered to the Scottish Parliament is the power to design a welfare system that is fit for purpose in Scotland. That will be one part of tackling the generational issues of poverty and social exclusion to which he refers. The increased powers in job creation and taxation, especially income tax, and the powers to grow the economy in Scotland, can be used to tackle the issues that the right hon. Gentleman is so right to highlight.

During the referendum campaign, the four party leaders made commitments to the Scottish people. Today we see three party leaders delivering on the vow that they made. Does my right hon. Friend agree that the best way forward for Scotland is for the SNP to acknowledge their leader’s statement that this would be a once-in-a-generation referendum?

Indeed; I could not agree more. The Prime Minister, the Deputy Prime Minister and the Leader of the Opposition made a vow during the referendum campaign. Today we honour that vow. The former First Minister and his successor—Alex Salmond and Nicola Sturgeon—also made a vow. They said that they would respect the outcome of the referendum and the decision of the people of Scotland. There is no reason from today for them to do anything other than to make it clear that we will not be returning to this question in a referendum, as they said, in a generation.

I, too, welcome the announcement today. It has delivered more than the vow—perhaps we could call it the vow plus. There is certainly more in the statement than was expected.

I welcome the fact that quite a lot of welfare is to be devolved, but it is right that pensions, especially the state pension, should remain reserved, because throughout the campaign and in all the polling, Scottish people, even many yes voters, thought that pensions should remain part of the UK. When can we expect to see the detail of how some of this will work in practice? Not until the detail is available to all Members will we know whether it is practical or not that some of these powers should be devolved.

I like the hon. Lady’s formulation “the vow plus”. My party leader in Scotland, Willie Rennie, said this morning that this was “the vow max”. I agree with him on that. The hon. Lady is right to highlight that the state pension will remain part of the United Kingdom welfare system. That is one of the most significant parts of the social union that the people of Scotland chose to remain part of on 18 September.

As for the detail, as Chair of the Work and Pensions Committee, the hon. Lady will doubtless have an important role to play in working it out.

When a healthy majority of our fellow countrymen in Scotland voted to remain in our country, the United Kingdom, it seemed to me that they voted against the petty-minded, mean-spirited and spiteful nationalism that we see from the SNP, yet these proposals seem to be delivering deeper and greater separation between the component parts of the United Kingdom. When Tony Blair introduced his proposal for devolution, which I considered pretty half-baked, he said that it would end the rise of nationalism and cement the United Kingdom. Will my right hon. Friend explain what it is about today’s proposals that will cement the United Kingdom and not lead to yet greater demands for separation of the structure of our country?

In the course of the referendum campaign all three parties made a vow. It is absolutely essential that we deliver on that vow in the way we are doing today. The UK constitution is a dynamic model—it always has been and it always will be. It is one of the advantages of having an unwritten constitution, as we do. So yes, as I said earlier today, I remain sensitive to the wish of people in England in particular to see a reformed constitution working better for them. It is up to them to decide exactly what that means. We have done it for ourselves in Scotland. They now need to follow suit.

I am pleased that, contrary to reports, it has been decided not to recommend devolving abortion, which would have caused all sorts of problems. This is a very exciting day for Scotland, a day we should celebrate. I was going to say that we should put the cynicism and division of the past few years behind us, until I heard Stewart Hosie. Will the Scottish people be informed on an individual household basis of the eventual legislation that comes forward, as happened during the referendum? May I ask the Secretary of State to come to the birthplace of our national bard on 25 January to announce the draft legislation?

That sounds an enticing prospect. Subject to diary commitments—my own diary gets fairly full around Burns night—I would be more than happy to accommodate the hon. Lady’s request if at all possible. She raised the matter of abortion, the terms of the report in relation to which she will have seen. There is a clear statement that it is considered by the commissioners to be an anomalous reservation, and I can understand why they take that view. However, we have always dealt with abortion differently—we have always made it the subject of a free vote in this House, for example—and the commission reached a sensible compromise by recognising the current anomaly, but saying that a new process will have to be devised to deal with that. I hope that process can involve parliamentarians and civic groups beyond the two Parliaments, which might in some way build a measure of consensus.

Unfortunately, there appear to be a number of lacunae, inconsistencies and unanswered questions in the report. If we rush this process, we are in danger of throwing petrol on the embers of English resentment and Scottish separatism. I pose one question out of many: paragraph 95(5)(a) states:

No. Obviously, if the Scottish Government were to borrow, they would have the liability under the borrowing powers. On the hon. Gentleman’s earlier observations about what he perceives as lacunae, the resulting measure, when introduced as legislation in the Queen’s Speech following the election, will still be subject to the full scrutiny of this House and the other place, whoever is standing at the Dispatch Box at the time. I am confident of the abilities of this House and the other place, and that what we will have at the end of the day will work.

If the Secretary of State manages to visit the constituency of my hon. Friend Sandra Osborne, he would be most welcome to cross the border into Kilmarnock and Loudon—of course, Robert Burns lived in the village of Mauchline and had his works published in Kilmarnock. Will the Secretary of State confirm that the powers that will now be given, in addition to welfare and taxation, include responsibility for the Work programme? That will give the Scottish Parliament a real opportunity to add to its existing powers in respect of economic development in order to get people back to work, which is what many of our constituents will be concerned about.

I would be delighted to join the hon. Lady in her constituency as part of this grand Burns tour that I seem to have signed up to—I just hope that Opposition Members will not start complaining about the cost. She will see that the Work programme is to be devolved, which I think is sensible. Indeed, it was something John Swinney spoke about many times when I shared platforms with him during the referendum campaign. They have the powers; they just have to get on and use them.

Should not those of us who believe in lower taxes welcome this proposal’s potential to encourage a healthy competition between London and Edinburgh over which sets the lowest rate of income tax? If Edinburgh sets a significantly higher rate than this Parliament, there will be a movement of talent from Scotland down south. Likewise, if we set a higher rate than Edinburgh, people will start moving to Scotland. That competition should hopefully lead to lower rates of tax.

That is indeed one of the possible consequences. The truth of the matter is that the Scottish Parliament will, for the first time since it was set up, control both sides of the books for the areas for which it has responsibility; how it spends money and how it raises it. It will then have to be accountable to the voters for how it taxes them. I think that in time, that will have a transformative effect on Scottish politics.

In 2011 the people of Wales had a referendum on greater powers. The Secretary of State might wish to consider the arguments for giving the people of Scotland a referendum on these powers, if for no other reason than to flush out exactly where the SNP stands on the Smith commission.

That is an interesting idea, but the real purpose of proceeding according to the timetable we have set out is that we will be able to put the proposals to the people next May, which will be the referendum that matters.

I congratulate my right hon. Friend, who is implementing a long-standing Liberal policy and succeeding where Gladstone did not. I am delighted to see that the Crown Estate is to be devolved and that the Smith commission recommends further devolution of its assets to the island authorities. Will he support devolution of the Crown Estate’s assets to other coastal and island communities, such as those in Argyll and Bute?

I do not think there is much debate, Mr Speaker; I do not set myself up for that claim. On the Crown Estate, my hon. Friend is right: that is one of the report’s most significant proposals for our coastal and island communities. Indeed, it requires the Scottish Government, when they have devolved control of the Crown Estate, to pass it on to coastal and island communities. We all know what happens when power is devolved to Edinburgh: it tends to stick there. Scotland now has, as a result of seven years of SNP government, one of the most centralised Governments anywhere in Europe. The report mentions Orkney, Shetland and the Western Isles, as my hon. Friend says, but it begins that recommendation by referring to

I too welcome the Smith commission’s proposals for Scotland. [Hon. Members: “Hooray!”] I will support any process that transfers powers from unelected Tories in Scotland to the Scottish people. Does the Secretary of State even start to recognise the palpable sense of disappointment that exists in Scotland this morning, whether among Scottish people who wanted maximum devolution and expected something close to home rule following the type of talk in the run-up in the referendum, whether among those in the voluntary sector who expected the full transferral of welfare powers, or whether among those in the trade union movement who wanted real job-creating powers and say that they are underwhelmed by the proposals? While we all welcome the proposals, does he at least start to recognise the disappointment at the fact that they could have gone much further?

I fully accept that the hon. Gentleman wants independence and always has done. That is why we had a vote. It pains me to tell him that he lost, however, and it is about time that he and his party came to terms with that. For him to try to use this process to get independence by the back door does not respect the views of the Scottish people as expressed on 18 September. It is perhaps about time that he thought he has a duty to speak for the 60.19% of his own constituents who rejected independence on 18 September.

In the fall-out from the recent Scottish referendum—in which only people in Scotland had a vote, but the people of England, Wales and Northern Ireland were bound by the result—the Scottish nationalists now object even to the prospect of a UK-wide referendum on our membership of the European Union, claiming that Scotland would be bound by the British consensus. Does my right hon. Friend detect, as I do, more than a whiff of tartan hypocrisy in this stance?

Of course, as hon. Members have pointed out, this agreement affects all parts of the United Kingdom—Wales, England and Northern Ireland as well as Scotland. Will the Secretary of State explain the implications for the Barnett formula of the tax measures in the agreement? In particular, if the Scottish Parliament decided to reduce the level of income tax, what implications would that have for the Barnett formula?

The Barnett formula remains in operation, but only for the portion of the budget going to the Scottish Parliament that is not accounted for by the taxes that are currently reserved here and are going to be devolved. Detailed technical work is currently under way on this between the Treasury and the Scottish Government. Announcements will be made on its practical application in relation to the 2012 powers in fairly short order.

I particularly welcome Lord Smith’s comment in his foreword to the document,

“that neither the Scottish nor UK Governments will lose or gain financially from the act of transferring a power.”

Following on from the remarks of my right hon. Friend Sir Tony Baldry, does that not underline the fact that if a Scottish Government wanted significantly to increase public spending in Scotland, Scottish taxpayers would foot the bill, and that is good for the accountability of Holyrood?

I could not agree more. The Scottish Government keep telling us that they want to spend more money; well, now they can, and in order to do so they will have to raise taxes or cut money elsewhere. That is how politics works.

It sounds as though it is thanks to Labour that the Smith commission is proposing such an excellent deal for Scotland. Is the Secretary of State having discussions with his ministerial colleagues about devolving power to English regions via their local authorities?

I caution the hon. Lady about seeking to claim too much credit on behalf of her party, or any other. As I said, this required us all to participate in good faith, and we all had to make compromises. No individual party should seek to claim too much credit; it was a joint effort. She knows that I am sympathetic to devolution to parts of England, but a concrete proposal has to be worked out. We did that over many years in Scotland, and I am afraid there is no quick or easy way for her and her communities now to do it for themselves.

The Scottish referendum showed without doubt that a large number of people who voted for the SNP may not necessarily have wanted independence. May I urge my right hon. Friend to ensure that, when the SNP wipes out the Labour party next May, it is seen as a rejection of the Labour party rather than a reflection of the need for further devolution or separation?

May I commend the work of all the commissioners on the Smith commission, particularly—not to single anyone out—my hon. Friend Gregg McClymont? There is a perception that politicians do not keep their promises, but the truth is that the solemn promise we made to the Scottish people during the referendum campaign has today been not only delivered, but delivered with bells on. May I encourage the Secretary of State to look seriously at double devolution, to make sure that today’s announcements and the commission report create not just a powerhouse Scottish Parliament, but powerhouse local authorities and, more importantly, powerhouse local communities?

Indeed. The hon. Gentleman will see some support for his latter proposition in the report’s foreword, under the heading, “Devolution from the Scottish Parliament”. Lord Smith articulates, in a very measured way, the galloping centralisation we have seen in recent years in the Scottish Government. I appreciate the way in which the hon. Gentleman did not single out the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East. In the same tone, I should not single out my right hon. Friend Michael Moore, who, along with my constituency colleague, Tavish Scott, played a tremendous role in getting this deal.

In the Scottish referendum, if people voted yes they were voting for full independence, but it now seems that if people voted no they were voting for more independence. Will the Secretary of State explain how those people who wanted the status quo should have voted in the September referendum? Will he personally accept that, as more power is given to the Scottish Parliament, it is unacceptable and unjustifiable for Members of Parliament from Scotland to continue to vote on issues that affect only England?

As the Prime Minister himself said this morning, he always said that a vote for no was never going to be a vote for no change. Indeed, when the people of Scotland went to the polling stations, all parties had put out their detailed proposals on what would follow in the event of a no vote. As I have said on a number of occasions today, on the question of constitutional change in England, a process is now under way, led by my right hon. Friend the Leader of the House.

May I congratulate the right hon. Gentleman and my hon. Friend Margaret Curran on their hard work? I also congratulate the six SNP Members in particular—it must have been very difficult for them to compromise on an area on which they do not usually compromise in any shape or form. [Interruption.] Does the Secretary of State agree that now is the time for the Scottish people—the families and friends who were split and the people who did not talk to each other because of grievances caused by the referendum—to get back together and put Scotland first?

Did I say it was sotto voce? It seems to have ratcheted up a little. The hon. Gentleman had his chance when he was called by you, Mr Speaker.

John Robertson is absolutely right. This is a time to heal the divisions and bring the people of Scotland together. We had a vote, prior to which we said we would deliver change and today we have told the people of Scotland what that change will be. It is time to get together and use the powers that the Scottish Parliament has and will get, and to use them for the good of the Scottish people and the Scottish economy.

It is already a tough market for north of England and Yorkshire airports. Does the Secretary of State agree that, if Scotland is going to get flexibility on air passenger duty, north of England and Yorkshire airports have to get it, too?

The question is how the Scottish Government choose to use any flexibility they have. If they choose to cut air passenger duty, they will obviously have to cut some public service provision or raise some other tax. The hon. Gentleman should not assume that flexibility only goes one way.

In Wales, we are required to have a referendum before we have income tax devolution of a much more modest nature. The devolution of income tax in Scotland will have profound implications for migration. In particular, if the Scots lower the top rate of tax, richer people will naturally move to Scotland. If unemployment goes up in Scotland, they will raise tax at the lower rate and reduce public services, because they do not have compensatory borrowing powers. Given that, should there not be a referendum of not just the 8% of people who live in Scotland, but of the rest of the UK? We should not be driven by the 4% of people who voted for independence; the profound implications for migration, taxation and all the rest of it should be decided by the whole of the United Kingdom.

That is not how we have done these things in the years since the late 1970s, when such decisions were first mooted. The hon. Gentleman has outlined all sorts of scenarios, many of which are possible, and some of which we may even see. That is what we mean when we say that the United Kingdom changed for ever on 18 September. The duty is on all of us in the political parties and the body politic to come up to the mark and to meet that change. As far as referendums are concerned, I am afraid that I have had enough to be going on with.

May I congratulate my right hon. Friend the Secretary of State on his considerable achievement in helping to secure this historic agreement? I also pay tribute to his predecessor, my right hon. Friend Michael Moore. I invite the Secretary of State to agree with me that, as Mr Allen said earlier, what is good enough for the Scots is good enough for the English, too. Does the Secretary of State support a similar constitutional arrangement for England?

I thank my hon. Friend for referring to me and my right hon. Friend Michael Moore.

My hon. Friend is right to say that constitutional change has to come to other parts of the United Kingdom. However, it is not for me to tell the people of England how they want to govern themselves. They have to have that conversation and make the decision for themselves.

No, the amount taken from income tax will now be divorced from the Barnett formula. The Barnett formula will operate for that part of the public expenditure grant to Scotland and the Scottish Parliament that remains after that process.

If legislation on elections is a Scottish matter, does that mean that Scotland decides who gets a vote in Scotland, or is that only so for the Scottish Parliament, while Westminster decides who gets a Westminster vote?

That is in fact the case. That matter is dealt with in some detail by Lord Smith in his report. The responsibility in relation to elections to local authorities and to the Scottish Parliament will be devolved to the Scottish Parliament. However, this House will retain control over elections to it.

I do not envy the Secretary of State his task of going in January to all of the parts of Scotland where Robert Burns dallied and romanced. The important point, however, is that a lot of people in Scotland want to be involved in this debate and discussion. They want to be fully informed about what is happening, not just to be told what they think or to be told that there is some form of betrayal. What arrangements will the Secretary of State make to ensure that people are fully involved in these debates?

The hon. Lady is right to highlight that one of the great successes of the whole referendum experience was that we got the widest possible range of engagement across Scottish society. We have to make sure that that does not now just wither away; we have to do what we can to harness and nurture it. I recently met representatives of the Scottish Council for Voluntary Organisations, the Scottish Trades Union Congress, the Church of Scotland and the National Union of Students to discuss exactly that process. Not everything of this sort has to be done by Government and through the party political process. The most effective civic engagement is that which grows out of civic groups themselves.

Scotland receives from English taxpayers an additional annual public subsidy, over and above what any English region receives, not because there is an extra level of deprivation, but simply because Scotland is Scotland. What proportion of the funds that are given to Scotland under the Barnett formula will be affected by the ceding of tax-raising powers to the Scottish Parliament?

It was of common accord between the parties that the Barnett formula would remain. As I have made clear to the House, the amount of money that goes to Scotland under the Barnett formula will be reduced, because what is taken in taxation directly by the Scottish Parliament will be taken out of the equation. It is an important truth that, although the Barnett formula produces some anomalies, no party has ever been able to produce a better option.

Communities across Britain want power to be held and wielded closer to them. I therefore welcome Scotland’s increased self-determination. However, we in the north-east also want more powers to be devolved to us. The Secretary of State told my hon. Friend Roberta Blackman-Woods that there were no easy answers, but will he at least confirm that he is looking for solutions? Specifically, how will he enable us to ensure that Newcastle international airport can compete with Scottish airports in respect of air passenger duty?

The Government have already embarked on that process through the programme of city deals and growth deals over the past four and a half years. I do believe that there needs to be greater devolution to all corners of the United Kingdom. My family stretches to the south-west of England, where my in-laws come from. They understand that the needs of people in the south-west of England are as badly served by the conventional centralised model of government from Whitehall as the needs of the rest of my family in Scotland ever were. It is now for the hon. Lady and her communities to come forward with a coherent plan for exactly what that change should be.

Further to that answer, in which the Secretary of State talked about devolution to all parts of the United Kingdom, does he not accept that when addressing issues such as English votes for English laws, which many of us feel passionately and strongly about, and the balance between local and central Government, it should be this sovereign Parliament of the United Kingdom that takes the final decisions, not some remote constitutional convention, as is suggested by those on the OppositionFront Bench?

Perhaps I should explain how constitutional conventions work. A constitutional convention brings together the political parties and the voices of business, the trade unions, civic groups, the Churches and all the rest of it. They build the consensus, as they did in Scotland, but it was this House that passed the Scotland Acts in 1998 and 2012. There is no question of our subcontracting legislative responsibility.

The commission and the parties recognised that foreign affairs would remain a reserved matter. The report refers to vital “national infrastructure” in respect of the security and defence of the United Kingdom. Will the Secretary of State confirm that all parties involved in the Smith commission, including the SNP and the Greens, signed up to that? Will he therefore have discussions with the Scottish Government to make it clear that it is this House and this United Kingdom that are responsible for the foreign and defence policy of our country?

Apparently, home rule for Scotland and the creation of a powerful Scottish Parliament can be decided on in the blink of an eye, but the issue of English votes for English laws needs to be kicked into the long grass, with a constitutional convention. Is it not the truth that, unless these proposals go along with English votes for English laws, my constituents in Brigg and Goole and the people of England will continue to get the fluffy end of the lollipop?

In the blink of an eye? I have been a political activist for 34 years, and this issue has dominated Scottish political discourse during that time, and I suspect for some time before that. A substantial amount of work was done on today’s proposals by the Liberal Democrats, the Conservatives and Labour before the referendum, so it is not a rushed or ill-considered piece of work but has considerable background. On English votes for English laws, the hon. Gentleman should be careful about devolving power within Parliament without tackling the same question within the Executive, as that would risk creating another instability.

The signature policy of the Smith commission concerns the full devolution of income tax receipts. The Wales Bill, which completed its passage through the House of Lords on Monday, devolves only a small partial element of income tax receipts, and only following another referendum many years down the line. When will Westminster stop treating Wales like a second-class nation?

I thought the only grievance we would get today would be from the Scottish nationalists; I had forgotten we had Plaid Cymru here as well. I commend to the hon. Gentleman the positive approach taken by all parties in building a consensus in Wales. We have always known that for different historical reasons, devolution across the different nations in this country emerges at different paces, which is absolutely right. If he wants more progress, he should try to learn from the Scottish nationalists—or at least from what they were doing before today—and work with other parties to build that consensus.

Scotland will get what Scotland wants, but when will England get what it wants? Does the Secretary of State agree that we need much more radical change in Westminster than has currently been contemplated, more radical devolution within England than has currently been delivered or offered, and a much more open, inclusive and democratic process than that being led by the Leader of the House?